T HE proposed company law is now in the final stages of passage through the
As this column previously set out, the enactment of a
company law is an essential component in the creation of the legal
infrastructure necessary for the operation of a market economy in Cambodia.
Together with the commercial register law, the draft contract law and a law
establishing a Cambodian commercial tribunal, the promulgation of a company law
will go a long way towards establishing a comprehensive legal framework within
which local and foreign investment companies may operate.
from the pre-1975 company law, the draft now being debated sets out the kinds of
business organizations which may be established in Cambodia and the basis
requirements which each form must meet. In its 224 articles, the draft company
law provides for the formation and regulation of sole proprietorship, general
partnerships, state companies, civil companies (non-commercial companies),
limited liability companies and sociétiés anonymes. The bulk of the draft
company law is applicable to each of these forms of enterprise. General
provisions which shall apply to all companies governed by the draft law include
- the company must have a stated purpose which is not contrary to public order
or good morals and which is not prohibited by law.
- the losses and profits of the company must be shared by all participants.
The draft law suggests that such division of profits and losses should be in
proportion to the parties' capital contributions. If the losses of the company
are made to be borne entirely by one party, the incorporation will be considered
null and void.
- all shareholders in a company must make a contribution of capital, such
capital contributions may be unequal but must always be valued in legal
currency. Capital contributions may be made in the form of cash, contribution
in-kind (generally being the contribution of real or personal property) or
contribution by the service. If contributions by service are to be made, these
may not be valued at greater than ten percent of the registered capital of the
company. Influence derived from a shareholder holding an official position shall
not be considered valid for the purposes of calculating contribution by
- Government employees and representatives of public authorities may not act
in their personal capacity as directors of commercial companies. Nor may they
serve as promoters for the incorporation of a commercial company in which they
will participate in their own name.
- Upon registration a company acquires the status of a "moral person". This
gives the company the right to participate as a party to legal actions and to
enter into binding agreements on its own behalf and not through its
- Companies shall only be deemed to have Cambodian nationality if their head
office is located in Cambodia and greater than fifty percent of the company's
capital is in the hands of Cambodian nationals. Similarly, only companies with
Cambodian nationality shall be permitted to register corporate names that imply
- The different forms of companies that are anticipated and governed by the
draft companies law, and a number of the provisions which apply specifically to
each, are set out below:
The draft law devotes 115 of its 224
articles to the treatment of sociétés anonymes. The société anonyme is a form of
limited liability company which is most commonly found in France and French
based corporate systems such as that of Cambodia. The provisions governing
sociétiés anonymes in the draft company law are quite detailed and include
regulations on company formation, the composition and function of the Board of
Directors, the role and responsibilities of the company's auditors, the
procedures to be followed at shareholders' meetings and the methods of corporate
dissolution among other things. Provisions specific to the société anonyme
include the following:
- The company must have at least seven shareholders
- The registered capital of the company must be at least one hundred million
riel, divided into shares having a par value of not less than ten thousand riel
- For capital contributions in cash, the par value of the shares must be at
least twenty-five percent paid-in upon incorporation with the shares having been
fully paid-up within a period of three years. Capital contributions in forms
other than cash must be fully paid-in upon incorporation of the company.
- The Board of Directors must be comprised of at least three directors who
must be chosen from among the shareholders of the company.
Limited Liability Companies
Limited liability companies are
largely governed by the same regulations applicable to sociétiés anonymes. They
are more restrictive, however, in permitted number of shareholders and in the
transfer of shares to third parties. In this way they are best suited to closely
held corporations as seen in British based corporate systems. Provisions in the
draft law specific to limited liability companies include:
- Limited liability companies must have a minimum of two shareholders and are
limited to a maximum of thirty shareholders.
- They must have a registered capital of at least twenty million riel, divided
into shares having a par value of not less than twenty thousand riel
- One-twentieth of the annual profits of the company must be placed into
reserve funds until such times as the reserve funds amount to ten percent of the
registered capital of the company.
- The transfer of shares in a limited liability company to third parties must
have the prior written consent of a majority of the shareholders representing at
least three-quarters of the capital of the company.
Limited liability companies may be formed
by a single individual under the form of a sole proprietorship. The conditions
governing sole proprietorship are substantially the same as those governing
limited liability companies with the exception that the sole shareholder must be
a natural person and may not be another company. The management of the sole
proprietorship must be performed by the shareholder or by an individual
appointed by the shareholder.
The draft law defines general partnership
as the joining of two or more parties for the purpose of conducting commercial
activities under the same name. The partnership contract and corporate documents
must be registered in accordance with the requirements set out for companies
limited by shares. The major distinctions between partnerships and limited
liability companies ore sociétiés anonymes are as follow:
- In a general partnership each partner is personally jointly and severally
liable for the debts of the partnership as a whole.
- Partnership interests are not transferable or divisible without the consent
of all partners.
- The name of the general partnership must be that of one or several of the
- Unless otherwise provided in the partnership contract, the general
partnership is automatically dissolved upon the death, legal incapacity or
personal bankruptcy of any partner.
State companies are defined as those commercial
companies which are created by the state. They are formed and governed under
public law but are subject to commercial regulations.
Companies that are
formed as cooperations between the state and private parties are considered
"mixed companies". These are formed in the same manner as sociétiés anonymes if
the private interest is in the majority. If not, they are formed by royal
degree. In companies that have majority state participation, the chairman must
be appointed from a among the state directors. All directors must receive the
same remuneration, whether they represent the state or the private concern.
Civil companies are defined as those whose
stated purpose is not commercial but civil in nature. They are governed by civil
law rather than by commercial law. They take the form of a company limited by
shares and limit the liability of the shareholders to the amount of their
capital contribution. Shares in civil companies are transferable only with the
consent of all other shareholders.
- Michael Popkin is a lawyer in the Phnom Penh office of Dirksen Flipse Doran